Crowdfunding's Latest Invasion: Real Estate

The following guest post is by David Drake, founder and chairman of LDJ Capital, a New York City private-equity firm, and of The Soho Loft, a global financial media company with divisions in Conference & Expo, Publishing, and Consulting. Drake has spent 15+ years working with general partners, and with institutional and multi-family office limited partners, in real-estate-focused funds and fund of funds.

Crowdfunding is rapidly changing the real-estate investment market, offering developers new ways to finance projects, small investors a way in, and the socially conscious an avenue to support their local communities—and their local farms.

Here is a rundown of the real-estate crowdfunding firms I think will have the biggest impact. (Full disclosure: I have advised Primarq (number 7) on its secondary market strategy, where investors can sell their shares without having to liquidate the actual properties.)

1. Fundrise –The company lets people invest in their local communities, earning profits while becoming socially involved. Since its August launch it has raised $575,000 for two projects in Washington, DC—a food market and the rehabilitation of a closed library into an apartment building with retail space.

2. Realty Mogul– Launched last month, this firm already has funded two deals (worth about $200,000) while raising $500,000 in seed money. Accredited investors pool money to buy shares of pre-vetted investment properties for as little as $5,000. It was incubated by
Microsoft Techstars and won top awards in pitch competitions.

3. RealtyShares– This platform went on beta launch in November; it claims 289 investors intending to invest $1.5 million. As little as $500 can buy shares in commercial real estate, apartment buildings, and homes. It is led by a team of Berkeley students trained in finance, engineering, law, business, and media studies.

4. Fquare– The firm lets you invest in pre-vetted farmland for as little as $5,000. Farmers sell their land for 3-6% annual interest on 5- to 20-year leasebacks; once the lease expires investors sell the land and share the profits. There’s also a program to rent farm; instead of paying rent, the farmers deliver their harvest to food banks.

5. Collaperty – The first real-estate crowdfunding network is still little more than social. It lists real-estate opportunities and connects investors . It currently has 79 members collaborating on 14 real-estate deals, and is raising $22,487,456 in equity.

6. Prodigy Network– This platform for class-A real-estate investments serves the United States and Latin America; it is crowdfunding for various projects in New York and Bogota. Its investors have put $171.8 million into a skyscraper that will be Colombia's tallest building. Prodigy has produced $8 billion in sales since its 2003 launch.

7. Primarq– The NASDAQ of residential real-estate equity has developed a platform where investors help consumers buy homes, and home-owners can monetize the value of their homes. It also offers a secondary market where investors can sell their shares without having to sell the actual properties.

8. Globerex– Still in beta, Globerex is focused exclusively on commercial real-estate deals of $500,000 to $50 million. Users can create and track deals involving their own investors or those in the Globerex community.

9. CrowdMason– Also, in beta testing, CrowdMason is very basic, letting members identify and monitor commercial real-estate deals, in which sponsors will be required to make significant investments of their own equity.

10. iFunding–This firm chooses real-estate projects for you and shares the profits. For a $1,000 minimum, members can buy into any piece of the site’s portfolio of multi-family, hospitality, office, and residential properties. Each project is a distinct limited partnership that pays dividends in as little as six months.

For updates on the global crowdfunding industry or information on alternative investment activities, or if you have comments about this article, reach out to me directly at David@LDJCapital.com.